The Federal Deposit Insurance Corporation (FDIC) has ventured into uncharted territory by including cryptocurrency in its annual risk assessment for the first time. In its latest review, the FDIC underscores that cryptocurrency introduces significant risks and requires heightened supervision.
The FDIC’s intention to exert greater control over crypto companies is met with mixed sentiments within the crypto industry. While it challenges the traditional, sluggish banking system, the FDIC’s oversight aims to align crypto within the purview of existing regulatory frameworks.
Despite potential concerns within the crypto community, the FDIC, as a governing body, wields authority and intends to steer the sector in a direction congruent with the established financial ecosystem.
Collaborating with other federal banking entities, the FDIC emphasizes its readiness to delve into the interactions between banks and crypto, offering comprehensive supervisory guidance. This engagement arises as more banks consider or already establish partnerships with crypto institutions.
Within the report, the FDIC addresses the dynamic nature and rapid innovation of crypto-assets, pinpointing their potential to trigger “contagion” risks that might impact banks exposed to the sector. Additionally, the report highlights the “run risk” for banks holding stablecoin reserves.
To facilitate this oversight, all FDIC-regulated banks are required to inform the agency about their current and future crypto-related activities. The report cites instances of companies making misleading claims regarding the eligibility of FDIC insurance for certain crypto-assets.
The report concludes by noting the “heightened liquidity risks” attributed to the unpredictability of deposit inflows and outflows, a phenomenon linked to the crypto sector’s inherent volatility.
While the FDIC’s move signifies a shift toward more stringent regulation of the crypto industry, it is a signal that the crypto space is increasingly recognized as a consequential player within the broader financial landscape.
